One of Vista plc's trade investments was sold for a loss of £3.7 million, which was included in the company's income statement just below profit after tax. To arrive at profit or loss before taxes, the loss must be taken into account in the accounting process. This is not the case here.

Vista plc made £694,000 in pre-tax profit in the year that ended on September 30th, 2021. A subsidiary of Expo, Inc.

An abroad country where there has been a military coup is a major distribution centre for Expo Ltd's products. Your company was unable to participate in the year-end physical inventory count due to military junta travel restrictions. In the end of September 20x2, 75 percent of Expo Ltd.'s inventory was held at the overseas distribution centre.

Prescription drug company Pharm plc.

Pharm plc, a pharmaceutical product manufacturer, has substantial holdings in a foreign jurisdiction that mandates the registration of pharmaceutical products. Due to significant changes in the country's regulatory environment, Pharm plc does not expect to gain drug registration as rapidly as initially expected. However, the board of Pharm plc have decided that the company has sufficient finances to continue for the next 12 months after conducting an appropriate review. The directors feel that a further: issuance of shares within the next 12 months can provide the additional funding needed from that point on.

It has been noted in the financial statements by the company's board of directors. plc of Mog

Lighting fixtures are manufactured by Mog plc. As a result, certain of its finished inventory lines have a net realisable worth of £35,000 less than their original cost. They claim that because inventories are worth more now than when they were purchased, the corporation will be able to sell these products for more than their present net realisable value in a few years. Mog plc made £900,000 in pre-tax profits for the fiscal year that concluded on September 30th, 20x6. Assets and inventory totaled £4 million on September 30th, 2019, respectively.

Hubbard, Inc.

Medical syringes are manufactured and sold by Hubbard Ltd, a family-owned business. The company's plant is state-of-the-art and adheres to all applicable health and safety regulations. All of Hubbard Ltd's syringes are sterilised and individually packed before they are shipped out. The business's solicitors informed the company just before the end of the year that a patient had filed a lawsuit against the company on the grounds that he had developed gangrene in his right arm following a routine influenza vaccination. He claims that the syringe used by the doctor to administer his medication was infected. An amputation of this patient's arm is almost certainly in the cards. Solicitors representing the company predict that the lawsuit will not be heard for months, if not years. Also mentioned is that the patient is suing the doctor for damagesan injection was given by the doctor. The patient in question is seeking damages of at least £500,000. The financial statements are affected by this amount. The claim will not be included in Hubbard Ltd's financial statements this year. However, in the notes to the accounts, there will be a mention of the activity.

Requirements:

(a) 'The logical extension of audit deregulation would be to allow shareholders in all companies of whatever size, listed or otherwise, to choose whether to have an audit.

If the audit were no longer a statutory requirement, shareholders could decide for themselves what kind of audit suits their company and the commercial terms on which it is undertaken.

This would solve the problems of value for money, expectation gap and independence at a stroke'

Discuss the issues raised by this quotation and consider, reaching a conclusion, the advantages and disadvantages of there being a legal requirement for an audit. (12 marks)

(b) List the conditions of the Companies Acts which have to be satisfied in the UK before an

unmodified audit report on annual financial statements can be issued.(8 marks)

(c) In respect of the situations outlined above, reach a conclusion on whether you would modify each audit report. Give reasons for your conclusions and describe the potential effects on each audit report.

Answer rating: 100% (QA)

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